BL (2025 - Q1)

Good day, and thank you for standing by. Welcome to the Q1 2025 BlackLine Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Humphries, SVP of Investor Relations. Please go ahead. Matt Hum

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan and Therese Tucker, Co-Chief Executive Officers of BlackLine as well as Patrick Villanova, Chief Financial Officer. Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular, our guidance for Q2 and full year 2025 are forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995. These forward-looking statements represent our outlook only as of the date of this call. While we believe any forward-looking statements in the call are reasonable, actual results could differ materially, as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic words filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. All comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Finally, unless updated, our financial measures disclosed on this call will be non-GAAP. A A discussion of non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is available in our earnings release, which may be found on our investor relations website at investors.blackline.com or filed with the SEC today. Now I'm going to turn the call over to BlackLine's Co-Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt, and good afternoon, everyone. Thank you all for joining on today's call. Overall, we are pleased with the performance in the first quarter and many of our operational priorities showed solid progress. We delivered 6% new growth in the first quarter with a non-GAAP operating margin of 21%. Bookings performance was solid with average deal size increasing, both on a net new and average base and importantly, the number of customers generating over $1 million or more in ARR increased to 79 this quarter, up from 71 in the quarter as we deepened and broadened relationships. Further, we saw momentum build through the adoption of Studio360, where we signed several deals with companies like Tractor Supply. Our new pricing model is tracking slightly ahead of our expectations. We saw several wins with customers such as USAA, who value the flexibility and predictability this new pricing model provides. Our go-to-market execution in the first quarter showed meaningful improvement across all geographies, driven in part by our Chief Commercial Officer's leadership as with our new leaders in Europe and Asia Pacific. We continue to see solid growth in our pipeline and within our SolEx partnership. We have implemented more rigorous deal qualification processes and strength and coordination between our account management and customer support teams. These improvements are expected to help drive expansion while reducing future churn and attrition, our digital-first marketing approach is enhancing commercial effectiveness as we introduce new features, functionality and AI capabilities for our users and prospects. These operational improvements give us confidence in our ability to create a more effective, efficient and predictable sales motion. Our SolEx partnership outperformed in the first quarter and remains a strategic growth driver. We are leveraging improved organizational -- allotment to accelerate joint sales efforts. This includes expanding our offerings to SAP users, especially with Studio360 and to deliver value as customers transition from on-premise to cloud ERP environments. Our industry-focused approach is delivering by combining our finance expertise and solutions with endo-specific knowledge. Many Q1 wins directly result from our industry expertise. And as Therese will share, we plan to launch additional industry-specific solutions to build upon this momentum. Public sector, we saw solid progress despite uncertainty our U.S. teams have developed a strong pipeline across federal, state and local governments, while working closely with key partners. The public sector is a key investment area this year as we see this as a long-term opportunity. We are applying the same disciplined approach marketing that we have implemented in sales, which has improved the volume and quality of opportunities supporting aggregate pipeline growth. In fact, we have seen material improvements in website visits demo requests and lead generation through our dot-com and digital marketing efforts, which is driving top-of-funnel activity. We continue to position ourselves as the autonomous finance platform for the office of the CFO. This leverages our established credibility and brand permission and record to report and invoice to cash processes while emphasizing how our platform and products are becoming increasingly critical to our customers' operations. We are reinforcing this positioning with a refreshed AI-focused strategy that highlights our technological capabilities and road map. Customers continue to prioritize rapid results and measurable returns on their investments. Our ability to deliver value quickly has become a critical competitive advantage. Customers need solutions that work immediately, not in 1 or 2 years, especially as technology investments may face increased scrutiny this year. A number of our wins this quarter related to customers restarting or accelerating their digital finance transformation journeys and using even more of the BlackLine suite. We have made significant progress in accelerating our implementation time lines for customers. In Q1, go-live volume increased by 20% compared to the same period last year. Also, our implementation times have been substantially reduced for our financial reporting analytics and invoice to cash solutions, and we are currently focused on more rapid time to value for our intercompany solutions. As mentioned, our SAP partnership continues to accelerate. We have implemented several key changes we announced last quarter. We have aligned our account executives, presales and customer success managers with SAP's market units. We have also succeeded in adding BlackLine solutions to SAP's channel price list, including our public sector strategy, Google Cloud Marketplace, Cloud Choice Flex and value-added reseller channels, which will be commercialized this quarter. SAP and BlackLine further align our unique finance transformation capability we have achieved an important solution in alignment, which allows the prepackaged bundling of both SAP author solutions and BlackLine author solutions into a single SAP SKU bundle that supports global finance transformation ERP offerings. BlackLine is also now included as part of the fault SAP solution offerings and sales motions to add value to SAP cloud ERP customers. We believe the small but critical change can increase our attach rate and position our solutions earlier in ERP migrations. This is a key part of our combined goals to deliver higher ROI and value for customers going through a digital transformation. We are SAP's first ever SolEx partner to be included in the SKU package bundle with SAP authored solutions. This is expected to deliver greater value to customers that need powerful financial consolidation solution. Looking ahead, we have a solid road map for launching additional products eligible for the SolEx program, especially Studio360. We also are exploring opportunities to develop AI and agentic AI-specific SKUs as part of this partnership as we continue to align our go-to-market vision. Our revenue renewal rate was 94% this quarter. While we could see some pressure on customer retention due to ongoing economic conditions, we have implemented several strategies to counteract and mitigate churn and attrition which should serve to deepen our importance with customers. First, our new platform pricing model helps protect against user-based attrition, which has been a headwind to NRR and revenue growth. Second, we are strategically shifting customers from annual to multiyear contracts as they renew. In Q1, the percentage of customers choosing multiyear renewals increased by 14 percentage points. This approach aligns with our strategy of guiding customers through transformation journeys while reducing churn and attrition and ultimately driving more consistent predictable revenue growth. Our RPO performance this quarter reflects some of our initial progress. Turning to key deal activity this quarter. In North America, we expanded with Marathon Petroleum has a traditional financial close customer Marathon was looking for additional automation across their invoice to cash processes to drive efficiency and improve their working capital cycle. Our invoice to cash offering provided demonstrable ROI especially when used in conjunction with our financial close solutions to give end-to-end connectivity and visibility across multiple teams and processes. Also in North America, we won a competitive enterprise -- rip and replace with a leading cybersecurity company for our suite of financial closed solutions, leveraging our unlimited user pricing model. While initial conversations were focused on enhancing efficiency, control and visibility at one division, our unlimited user model allowed the company to think bigger about global transformation and broaden their scope across the entire enterprise. The result is a classic win-win for both the customer and for BlackLine. On the SolEx side, we saw solid performance in our international markets, a key focus area for BlackLine. Specifically, we signed a net new deal with Rexel, a leading electrical distributor based in France for our financial close solutions. Additionally, we signed Japan Tobacco to a net new financial closed deal. Further, we signed Mitsubishi Electric and Idimetsu Koussan again, with core financial close capabilities marking continued success in our partnership in Japan. We also saw several Studio360 deals this quarter with companies like AGL, a leading Australian electric company who took advantage of not just our Studio360 platform, but also our unlimited user pricing to drive real transformation across their business. We signed Hitachi Energy Holdings and chose to leverage the powerful capabilities that Studio360 offers to elevate their existing financial close usage and drive even more efficiency and automation across their business. Now balancing our enthusiasm for our first quarter progress are the realities of the current macro environment. Recent policy announcements have made it difficult for companies to plan long-term investments with confidence. These policies could affect BlackLine as they may force customers in certain industries and geographies to postpone or reallocate investments until they gain more clarity about the future business environment. While we have not seen any impact across our pipeline, renewals base or implementations thus far, we are clear eyed that conditions may develop that influence our go-forward results. These potential risks are captured in our updated revenue guidance, which Patrick will speak to shortly. We believe that BlackLine is better positioned than ever to help customers adapt to today's environment. We offer practical, reliable and trusted solutions. Our company and invoice-to-cash solutions directly help customers offset potentially higher operating costs by minimizing taxes helping ensure compliance with trade policies, enhancing efficiency and improving working capital. Combining these with our new Studio360 platform, our pricing strategy, enhanced partnership with SAP our industry and public sector initiatives and our budding relationship with Workday strengthens our importance of the office of the CFO. This gives us the confidence to navigate the near term while remaining focused on delivering against our long-term goals. With that, I would like to turn the call over to Therese.

Thank you, Owen. BlackLine is accelerating rapidly, expanding our innovation initiatives across our entire platform and product ecosystem. This year marks one of our largest product release calendars ever, supporting the opportunity we see ahead. Our Studio360 platform showcases our innovation in action, with continuous enhancements across every layer. An important component is our strategic partnership with Snowflake, the foundation of our data layer. Already, more than 400 customers are leveraging the data engine to increase performance and scalability with many more poised to benefit from this over the next few months. And this quarter, we plan to relieve our Snowflake data sharing connector, unlocking powerful new capabilities for our customers. We're also enhancing the utilization capabilities across Studio360, giving customers precise control to customize BlackLine dashboards with their unique financial workflows and requirements. We've launched redesigned product dashboards with an improved interface and UI that customers love. In our orchestration component of Studio360, we've added new SAP and ServiceNow API integrations that simplify data management and workflow processes for users. And our upcoming Workday Connector launching later this year is designed to extend the same powerful orchestration benefits to Workday customers creating a truly connected financial ecosystem. Across our entire platform, we're adding AI-powered capabilities that amplify our existing automation engines. We've all witnessed firsthand how large language models can transform organizations, evidence we see in both traditional and genetic experiences. This isn't just innovation, it's acceleration purpose. Our vision is clear. accountants and finance professionals will evolve into strategic reviewers while AI executes the routine work. We're pioneering what we call autonomous finance by using our decade of automation expertise with cutting-edge genic technologies to create something powerful and mission-critical for our customers. In today's landscape, data isn't just information, it's currency. Our Snowflake partnership creates a robust data lake that unlocks powerful identic possibilities, connecting internal systems while opening gateways to external APIs. The goal is to position BlackLine as the backbone for the office of the CFO, where efficient and accurate data flows through and enables real transformation. A perfect example of the achievement of this goal is what ExxonMobil said in a recent earnings call. BlackLine has literally enabled them to save tens of thousands of hours of what was very manually intensive work because they can now automate it. Importantly, this has also allowed their teams to provide cleaner data across their company so that they can derive better insights while driving more efficiency. In the emerging agent economy, our collaboration with customers, partners and auditors addresses a critical need governance frameworks that ensure trust and security, while major AI model provides -- are pushing to eliminate structured APIs, our stakeholders recognize the opposite true trackable, auditable interfaces deliver both efficiency and reliability. For accounting and finance professionals, 95% accuracy equals 100% failure. This zero-tolerance reality demands what we can provide, a sophisticated AI-powered automation platform with complete audibility and control, the defining advantage in our market. To deliver on this, we have been strategically investing in 3 core AI technologies: Agentic AI, predictive intelligence and natural language exploration. Our platform now features 4 specialized genetic AI categories: Insight agents, summarization agents, conversational querying agents and matching agents. Insight agents transform raw financial data into actionable intelligence, improving accuracy, accelerating review cycles and driving proactive decision-making. These can improve data accuracy, accelerate close and review cycles and drive proactive action. Summarization agents, there still complex filings and extensive documentation into clear, insightful summaries, presenting drafts that maintain user control while eliminating resource strains and preserving auditability. Conversational querying agents enable users to analyze data using natural language and allow them to explore and explain key KPIs and trends allowing for faster and more informed decision-making. And finally, we plan to release our matching agents in the second half of this year, delivering AI-powered transaction matching that surpasses our already powerful traditional capabilities, especially for high-volume accounts. While our agent ecosystem excels with text and qualitative data, we're expanding our established machine learning capabilities through predictive guidance and risk detection features that are ideal for handling large volumes of financial data. Predictive guidance is available for both intercompany and invoice to cash leveraging AI and machine learning to analyze transactional data and forecast future outcomes, providing recommendations and insights to help guide decision-making. Our risk detection experiences proactively identify issues across financial data preventing adjustments and audit problems before they occur with solutions like our Journals risk analyzer. We're also expanding our industry-specific solutions to meet specialized industry needs. Our high-frequency reconciliation solution is already driving results from multiple customers. We're launching operational reconciliations initially for oil and gas customers, transforming our proven account reconciliation technology to handle nonmonetary inventory tracking. This evolution allows our customers to apply our powerful reconciliation capabilities beyond traditional accounting, reconciling physical commodities with the same precision they use for financial accounting. Over time, we see opportunity to expand these capabilities to other industries like financial services and retail. In financial reporting analytics, we're strategically focusing on strengthening our modern consolidation platform to meet growing market demand as legacy systems reach end of life. With customer adoption steadily increasing, we're delivering thoughtful enhancements designed for complex global enterprises. This year brings meaningful improvements to currency translation multidimensional segment reporting, intercompany eliminations and financial reporting frameworks. Our comprehensive record-to-report offering provides real value in today's marketplace, a significant advantage that sets us apart. Invoice to cash is evolving into a strategic value driver in our portfolio, delivering enhanced financial control precisely where customers need it most. Our platform requirements throughout 2025, focused squarely on maximizing working capital efficiently from streamlined electronic invoicing to intelligent cash application and management solutions. By integrating both proven automation and contextual AI assistance we're helping CFOs unlock previously inaccessible liquidity and gain the financial visibility essential in today's unpredictable economic landscape. As organizations increasingly prioritize cash preservation and cash flow management, we believe our enhanced capabilities address their most pressing financial challenges while strengthening our position as their trusted partner. To close, responsible AI is delivering measurable benefits across internal BlackLine operations and we aim to create similar results for our customers. From engineering to customer service, our teams are increasingly adopting AI tools. We estimate that this has saved more than 60 FTE equivalents since we began using AI internally in 2024. During this rapid pace of innovation, our priority remains clear: staying connected with customers and accelerating their time to value and ROI. I'm excited about the platform our team has built and what's to come, an AI-powered platform that transforms financial operations organizations need it most. I'm inspired by how our teams are developing our solutions and engaging directly with customers and partners to drive the next wave of innovation for financial operations. With that, I'll turn it over to Patrick to cover our financials. Patrick?

Thank you, Therese. As Owen highlighted, we had a solid start to the year as we continue to focus on disciplined execution to deliver our longer-term goals. Our proven ability to manage and expand margin is a key strength, allowing us to adapt to market uncertainty efficiently while maintaining our strategic direction and financial position. Now turning to our first quarter highlights in more detail. Total revenue grew to $167 million, up 6%, including a slight FX headwind. Subscription revenue and services revenue both grew by 6%. We saw higher-than-expected partner services mix, which caused our services revenue to come in slightly below our expectations this quarter. Annual recurring revenue, or ARR, was $656 million, up over 8% with an approximate 0.5 point benefit from FX in the quarter. Remaining performance obligations, or RPO, increased 11% with current RPO up 7%. RPO benefited from slightly longer contract duration due to new bookings combined with our multiyear renewals efforts. Calculated billings growth was over 9%, inclusive of a slight FX headwind, trailing 12 months -- billings growth was above 7% our customer count at the end of the quarter was 4,455, up 1%. Our revenue renewal rate in the quarter was 94%, up 1 point versus the prior year. Our enterprise revenue renewal rate remains very healthy at 96% with mid-market in our expected 90s range. Net retention rate or NRR was 104% this quarter, inclusive of a slight FX tailwind. We saw a healthy customer expansion, particularly in enterprise and stable pricing. Offsetting this were a few large enterprise customers who recently underwrite corporate reorganizations resulting in less entities and use. Strategic products represented 27% of sales in the quarter. We saw broad strength across our strategic product areas with outperformance from invoice to cash transaction matching and intercompany Partners were involved in 81% of large deals this quarter with a higher mix of partner involvement in new coder deals. SolEx performance was above expectations in the quarter driven by larger expansion deals. SAP as a percentage total revenue was 26%. Turning to margin. Our non-GAAP gross margin was approximately 80%, with non-GAAP subscription gross margin of 82% and in line with our expectations as we move through the end of our cloud migration period. Non-GAAP operating margin was 21%, driven by cost benefits from our workforce action in March, combined with an approximate 1 point benefit from FX. Non-GAAP net income attributable to BlackLine was $36 million, representing a 22% non-GAAP net income margin. We generated $47 million in operating cash flow and $33 million in free cash flow in the quarter, representing a free cash flow margin of 20%. Above-trend investments into strategic priorities like FedRAMP and our India development center, along with restructuring expenses and taxes, drove our free cash flow margin lower than the prior period. On taxes, we expect that our effective tax rate for the full year will be similar to Q1 at approximately 12%. Regarding our balance sheet and capital allocation, we have approximately $866 million in cash, cash equivalents and marketable securities versus $894 million in debt. Finally, we repurchased approximately 920,000 shares for a total of approximately $46 million in the quarter. Our share repurchase program remains a key part of our capital allocation framework going forward. In our updated full year 2025 financial guidance, we've expanded our revenue range to account for potential macro uncertainty. While we aren't currently seeing changes in customer buying behavior or in the demand environment, we are taking a prudent view for the balance of the year. Our revenue guidance represents 2 distinct scenarios. The top half of our range of 7% to 8% growth reflects continued execution within a relatively stable macro environment, consistent with our views from February. The lower half of the range 6% to 7% growth assumes we see buyer caution and extended deal cycles develop. In either case, our updated guidance reflects our expectation for further margin expansion despite continued strategic investments that drive growth beyond 2025. For the second quarter of 2025, we expect total GAAP revenue to be in the range of $170 million to $172 million, representing approximately 6% to 7% growth. We expect non-GAAP operating margin to be in a range of 20.5% to 21.5%. And we expect non-GAAP net income attributable to BlackLine to be in a range of $38 million to $40 million or $0.51 to $0.53 on a per share basis. Our share count is expected to be approximately 78.2 million diluted weighted average shares. And for the full year 2025, our updated guidance is as follows: we expect total GAAP revenue to be in a range of $692 million to $705 million, representing 6% to 8%. We now expect that FX will be slightly less than a 1 point headwind this year. We are raising our non-GAAP operating margin to 21.5% to 22.5%, up 50 basis points at the midpoint versus the prior guide. And finally, we are raising our non-GAAP net income attributable to BlackLine to $159 million to $167 million or $2.12 to $2.22 on a per share basis. Our share count is expected to be approximately 77.9 million diluted weighted average shares. With that, I'll now ask the operator to open the discussion to take your questions.

[Operator Instructions]. Our first question comes from the line of Rob Oliver of Baird. Your line is now open.

Great. Thank you guys for taking the question. I appreciate it -- for you guys. Just on the SolEx numbers and some of the larger deal expansions being solid, obviously, SAP has the sapphire event coming up. And I was wondering if you guys could just give us sort of a level set given the macro, the environment, what you're seeing within the SAP channel and how we should expect BlackLine potentially set up for these moves towards S/4HANA and ERP migrations? And then I had a quick follow-up as well.

Sure. Robin, thanks for the question. Overall, we are really pleased with the progress we're making with SAP. As we shared with you turning at an Investor Day back in November and then in the first quarter, here of our strategic things, SAP senior leadership and BlackLine agreed that we would do, and we have executed on all those pretty well at this point in time. And what you're now beginning to see, well, we're beginning to see is a much more robust pipeline, much more work together in the marketplace, trying to get existing customers to even be better adopted of what BlackLine has to offer. More enthusiasm around what BlackLine brings in the SAP community. If you remember, SAP had 3 strategic priorities. One was AI, the other was in the office of the CFO. And the third was just around being more in cloud and all the things that BlackLine brings helps support that. And so a lot of enthusiasm for what we're seeing. We expect the pipeline to continue to grow very nicely. And as you know, SAP's biggest quarter was a fourth quarter -- where I think they've got 40% of their business. And that's what we are trying to build. It's been terrific to have Stewart, our new Chief Commercial Officer, in-house able to sort of further deepen and broaden those relationships. But also what I think we've really good about is how things are beginning to resonate on the front lines out in the battlefield because it's nice to talk about things at headquarters, but really starts to gain traction is on the frontlines, and those are the things that we're seeing at this point in time.

Got it. That's really helpful. I appreciate it. And then Patrick, for you, I really appreciate the clarity around the guidance range and the different scenarios, risk adjusted. That's incredibly helpful. I wanted to just ask, obviously, positive, you guys are calling out better margins on either front which is great. I just wanted to get a sense, 1 quarter into the year for what gives you that confidence on the margin side particularly relative to some of the growth initiatives you guys are spending on. And does that come at the expense of accelerating some of the investments in 2025? Or how we should think about that positive margin scenario? Thank you.

Yeah. Thanks, Rob. I appreciate it. So looking at Q1, you'll see that we had a pretty notable beat in our margin for the quarter, and part of that was related to FX, but a majority of that was organic to the business. And we were able to achieve that without compromising or holding back on any investments that we have planned to do for growth in 2025 and beyond. So we've passed some of those savings along into the guide for the remainder of the year. And the guide now does contemplate that we're going to continue to make all the investments that we talked about in past calls. During the November Investor Day as well as in February and make those investments as it relates to not just growth for 2025, but for 2026 and beyond. To the extent that we see a changing demand environment in the future as a result of the macro. We do have the ability to pull on that margin lever if need be and slow down those investments. But as it stands today, our expanding margin guide contemplates that we are on plan. We're executing on our strategy, and we're going to make all the investments we need to do to drive our growth initiatives.

Thank you. Our next question comes from the line of Koji Ikeda of Bank of America. Your line is now open.

Hey, guys. Thanks a lot for taking the questions. I wanted to ask or dig in a little bit more here on the new platform pricing model. And it definitely sounds like things are beginning to take shape there. And even visible with the total users being down, being called out in the press release that, that's a result of platform pricing being adopted. And so it does feel like this might become one of the key metrics here, users to help get visibility into how platform pricing is being adopted. And so maybe could you talk about some of the dynamics with that metric, the total users out there? And how to think about kind of the sequential decline there? And how does that translate into adoption of the new pricing model? And are you targeting certain types of customers to maybe adopt that pricing model first? Is it based on size? Is it based on geography or vertical? I mean, any sort of help there on this new platform pricing model would be helpful, it would be great. Thank you.

Yeah. Thanks, Koji. So when a customer adopts a new platform pricing model, we do take their users down to 0 because they're no longer on a user-based pricing model. So that's what you see in our metrics. But more importantly, when we think about Q1 and beyond in terms of how things are working, we did exceed our expectations for Q1 in terms of adoption of the pricing model. Now I'll say that with the caveat that it is too early. We're 3 months into a multiyear plan. And as we stand today, we have rolled out the pricing model to new logos within North America as well as a renewal space in North America. Q2, we're going to see that expand to the renewals base in EMEA and continue to roll it out in such a fashion. That is intentional. We never intended to do a big bang with a new pricing model. So we are slowly rolling it out, and we're seeing traction slightly ahead of what we had planned. In terms of who we target, it is mostly upper mid-market and enterprise. And there is a rationale for that. Basically, who do we not target? It's lower mid-market. When you have low user count as a company, you typically do not sell an unlimited model there. But more importantly, when we look at our customers that have hundreds, if not thousands of users, when we engage them and say, we never have to have the seat license conversation again. We never have to have the user count conversation again. It really resonates with them, and that's why we're seeing the level of adoption that we are.

Thank you. Our next question comes from the line of Patrick Walravens of Citizens. Your line is now open.

Great. Thank you. Congratulations on the quarter. Therese, would you mind sort of walking us through at a high level, the difference in your approach to using AI and BlackLine and then versus I got a demo of what FloQast was doing with their AI agents or seems more embedded in Excel, among other things. But it seems like you guys are taking different approaches and I'd love to hear just sort of the key points.

Yeah. I think that's a great call out, Pat. We are taking a different approach. First off, we want to make sure that we approach it the way our market and our customers need it. And I was just seeing a demo of one of our AI agent the other day. And we had an extensive audit trail included in there. Basically, now we're looking at this. Now we're looking to pass reconciliations. And while I got very impatient with that. I recognize that our customers are going to do in order for auditors to embrace AI. There has to be a very clear audit trial that shows them how certain things were done and how certain conclusions were arrived at. And so we're very much focused on sort of not the glitz of something like, cool, it just did that for me. But we're really focused on how do we provide agents that give long-lasting value that will be accepted by finance executives and cleared by auditors, okay? We're really kind of taking a very long-term approach to this. Combined that sort of, we call it responsible AI, call it whatever you want, but we are combining that with how do we leverage the fact that we have 20 years' worth of SaaS data across literally thousands of customers that we can do real learning on and rather than do a simple bank account rep, which everybody can do, how do we actually pull out real insights and real value from the history of this information. So yeah, we're taking a bit of a methodical approach, but I think that for longer-term adoption and longer-term value creation for our customers, it's the right way to go.

Thank you. Our next question comes from the line of Pinjalim Bora of JPMorgan. Your line is now open.

Great. Thank you for taking the question. Owen, Patrick, maybe just one question on the renewal rate. It seems like it was moving in the right direction as of last quarter, but it seems like it's taken a step back. So want to ask you what kind of drove that particularly is that -- would you attribute that to kind of the macro environment? Is there the new pricing model that you're rolling out? Did that had any role to play? And then how should we think of that metric kind of trending over the quarters?

Thank you. So Patrick and I will answer this together, if that's okay and I think a couple of things. So one is we're still very pleased with where we are in the enterprise space. We're going to continue to try to drive that higher. We're still going to have those pockets in the mid-market churn that we talked about a while ago with some of those customers that probably should have never come to plan a few years back that didn't get well asset. So that will work its way through this year. And then our customer teams or renewal teams are really trying to focus on driving a higher mix of multiyear renewals. And why that matters is because we're having these conversations with our customers, are you going on a journey or not? And if they're going on a journey to really do digital finance transformation, BlackLine is great for them because then we can create these plans, work with them jointly with our partners that are helping to do implementations along with their management team. And so that shows up really the right way. The pricing model, in some ways, I think, helps with the renewal rate I think we're doing a better job of trying to look at the rigor we want to have across our sales teams for the different things that we're doing in the conversations with our customers. That said, there's aspects that Patrick touched on it in the prepared remarks. We have a number of large customers, 3 of them in the first quarter that went through pretty significant reorganizations, restructurings, where they got rid of a lot of entities, their intercompany volumes went substantially down. And I do think the one thing we're continuing to watch is those customers that are going to maybe be under additional strain in this environment and what impact that might have on attrition. Again, in the enterprise space, it's not really churn, but it's where customers are trying to potentially scale down in a tighter environment. But I think that pricing model should be able to help us a little bit. Patrick, I know you're studying this left and right. So you want to add anything there?

Yeah. Just to be clear, the pricing model and what we've done thus far has only benefited churn and attrition now. And now granted it is so early, but it has not been a headwind to that effort whatsoever. The overall renewal rate is up 1 point year-over-year, down very slightly over the prior quarter, and that has a little bit to do with the renewals base and some of the things that Owen talked about. But overall, we expect to see the enterprise renewal rate and continue to be in the upper 90s with the mid-market rate in the lower 90s, and we'll continue to work to push that up. But overall, it was a good outcome.

Thank you. Our next call comes from Chris Quintero of Morgan Stanley. Your line is now open.

Hey, Owen, Therese, Patrick. Congrats on the nice set of results here. I want to follow up on Koji's question around the pricing model. I think it was you who mentioned that the unlimited model has now allowed for some rip and replace of competitors. So I'm just curious like -- is that model helping you from a win rate perspective and going head-to-head against some of your competitors? Obviously, you all have been a bit more -- on the pricing change dynamics moving away from a seat-based model. So just curious about the competitive landscape implications of that at all.

Patrick and I are going to duet at it again on this. So if you don't mind. So look, I don't know that it's the complete differentiator to get started. It might help in maybe some of the close. I mean, I do think our larger customers like the fact that there is this opportunity. And it again takes away that issue of how many seats do you have back and forth. It's certainly not something we're leading with. Our value proposition is the quality of the breadth, the depth, the reliability, the trustworthiness of what BlackLine brings. And that's the value proposition that we start with. Now we do see some, in particular, one competitor that is very fixated on race to the bottom on pricing, but that's a different way for us to sort of go off -- compete against them because for us, again, it's about quality. And you can tell a lot about the existing prospect of where their priorities are. If it's about quality or the cheapest price they can get for it into the product. And so I think pricing, flexibility we got Patrick and the team built in will help us, but I don't think it's the most determinative thing as we've been in market and with this now for, I guess, 4 -- months.

Yeah, I would agree. The most important thing is articulation of the value that we bring incrementally over our competitors. And then our pricing model mirrors that value that we deliver. So I would say it's a competitive advantage, but it's a derivative of the fact of the value that we deliver.

Our next question comes from the line of Steve Enders of Citi. Your line is now open.

Okay. Great. Thanks for taking the question here. I guess I just want to ask on just pipeline dynamics that you're seeing right now, it seems like maybe things are getting a little bit better, at least with the SAP relationship of Valve and some of the marketing initiatives that you're going through. But have you maybe seen any impact yet on pipeline from any of the uncertainty that you're maybe accounting for in the outlook? Or just any other factors that we should take into consideration as we think about the pipeline dynamics for the rest of the year?

Steve, good to hear from you. And you can't hear me knocking wood on the table here right now, but we've got about 6, 7 straight months of really solid growth in the pipeline. And I think it's a testament to our marketing team is doing what our sales team is doing, what our customer success team is doing, what our partners are doing with us and our own professional services team. All those groups are really focused on trying to find those opportunities to help -- expand our footprint with existing customers as well as that new opportunity. So we have not seen any falloff in size of the pipeline, the quality of the pipeline, the request for demos, all those numbers are up substantially year-over-year and even just again in the last 6, 7 months, just we're really excited about what's there. Now obviously, we got to close all these deals. And there's a lot of things that can happen between here and there. But right now, we feel good about the pipeline. I think we're all sitting here though with -- breath. Wondering when July 2 gets here, what's the roll is going to look like from a trade perspective.

Our next question comes from the line of Alex Sklar of Raymond James. Your line is now open.

Patrick, one for you. Just on the commentary about the growing multi renewal bookings. I appreciate the call out on RPO. Is there any duration impact to factor for deferred revenue that would make kind of billings? And I know you talked on TTM -- is a good leading indicator to become a little bit less reliable in the past? Or is the multiyear only impacting RPO? Thanks.

Yeah. The short answer there is it's only impacting RPO. TTM billings, the metric remains the same. Maybe just to give a little color, when we engage our customers these days, they want to be on a multiyear journey with us. While it might take just a few months to do an implementation of our products, the overall journey for transformation takes multiple years. So when we have that conversation with them and they want to partner with us and we want to be there for them, it's mutually advantageous for both us and our customers to sign a multiyear extension or sign a multiyear initial deal. For us, it provides revenue assurance, and it gives us time to work with them. And for them, it provides cost of shortness. So it is something that's really important in this current economic environment. So when you look through our RPO and what is happening, we have existing customers that are extending what is typically a 1-year renewal term for 3 more years, to provide that shortness and continue on the journey with us. That doesn't change how we invoice them, but it does change overall duration and overall RPO.

If I could just add to that. I think one of the things that we feel good about is from a partner powered strategy perspective, as we've talked to all of our top partners in the last week or so, they are really busy right now, telling us things like they expect 20 to 30-plus percent growth in their business. They've got more opportunities. I think they're brimming with opportunities, one of them described and everyone said to me that their opportunities are almost double where they were a year ago. And so I think what we're seeing from there is not only a net new, but importantly, again, these customers reigniting, getting start again on digital finance transformation. And that I give a lot of who knows do our own team and our partners who are trying to have those conversations because we're using our information and insight where we can see how quickly a customer is moving vis-a-vis their others and get them back on a journey of where they need to go. And I think using that benchmark data, that industry insight that Therese touched on a little bit, does help customers say, Hey, maybe there is more we can do here or prospects saying, hey, maybe there is more that BlackLine can bring that we're not getting from somewhere else. So those are all positive things that we're seeing in the business right now.

Thank you. Our next question comes from the line of Ryan Krieger of Wolfe Research. Your line is now open.

Hey, guys, thanks for taking the question. I just wanted to follow up on Cogan [ph] Chris's question earlier around the pricing model. Really great to hear that migration volume is ahead of plan. But where early kind of ACV uplift tracking against plan, just given I think it accounts for about 1 to 2 points of growth acceleration in your long-term model bridge. And then Patrick, one for you. Just how should we be thinking about net retention for the rest of the year in the context of the guide? On one hand, you're calling for a little bit of a more uncertain environment, but it sounds like there's a lot more stabilization and tailwinds coming into the business. So how should we think about that?

Okay. I'll start with the second question. In terms of net retention, I guess on the guide that we talked about in February, assuming that the macro environment in provide any notable headwinds. We still feel very confident that we're going to plot a path from 104 to 109, which is our target model over the next 3 to 5 years. So one would expect, while that's not going to be particularly linear, you're going to see a consistent uptick as we continue to execute our strategy. Going back to the first question there, in terms of pricing, you're correct in terms of what we communicated in November. And I believe, again, in February, is a 1% to 2% expansion in growth over that same 3 to 5-year term, that target model. Yes, we are currently on pace for that. Again, it is early. But when I made a comment earlier today or earlier in the call that we're slightly ahead of target. That's exactly what I meant. We have a target each quarter based upon not just our renewals base but also new logo as well our expansion throughout the world, and we are slightly ahead of that target, which equates to 1 to 2 points over the next 3 to 5 years.

Thank you. Our next question comes from the line of Terry Tillman of Truist Securities. Your line is now open.

This is Dominique Manansala on for Terry. Thank you for question. So you all mentioned traction with state and local governments. So beyond just FedRAMP timing, how are you equipping the team to build an advanced public sector opportunities. And can we realistically see meaningful contribution from that segment in the second half?

So good to hear from you, Dominique. A couple of things. So one is we're working very closely with a number of our partners that have pretty extensive state and local practices, right? So there's no way we could ramp up to cover all 50 states in the top 50 cities across the country. But our partners who are walking the halls those government agencies are the ones that we're really trying to use. I think we might have shared the last time you're seeing a lot of the equivalent of Dutch-type efforts at state and local levels. That we are now getting more involved with where we're sort of explaining the value of BlackLine, how you can capture value, whether it's at a municipality level, state level, depending on the nature of the agency. And so we're doing much more in that regard. Also, SAP has a pretty extensive federal, state and local government business as well. So we're tying into all of that. So those are the things that we're trying to do. We did not build much if anything, into the financial plan because I think it was quite nominal. And so anything that hits this year will be sort of better than we had anticipated, but it really was setting us up more for next year than it was for this year, Dominique.

Thank you. Our next question comes from the line of Daniel Jester of BMO. Your line is now open.

Great. Thank you for taking my question. It sounded like in the beginning of the prepared remarks that some of the investments you've been making in different verticals have been helping close deals. And so I wonder in the current environment where some verticals may be more exposed than others, are you reprioritizing in terms of where you're investing this year? It sounds like maybe not, but if you could share some color, that would be helpful. Thank you.

Thanks, Daniel. I would say we're not prioritizing any of the verticals at this particular point in time. It started with 5 last year. The results in the first quarter, which show that more than a small majority of our success came in those 5 industry verticals. And in some ways, those industries that might be under the most pressure. So if you think about some of the manufacturing and retail customers that we support some of the toy manufacturers as an example, it may be more that we can do to try to help them from a use case and get more efficiency out of it by the same token, some places where we're doing quite well. And we see a lot of opportunity. We just continue to double down in that regard. So we're going to stick with the verticals that we had. The use cases are resonating very well with our customers, the insights that Therese talked about earlier, are real. They're meaningful when we start to take some of our best examples of what we can do with our customers, our prospects for data it becomes a very interesting conversation very quickly. And so we'll keep doing that because we know it's a differentiator for us in the marketplace.

Thank you. Our next question comes from the line of Adam Hotchkiss of Goldman Sachs. Your line is now open.

Great. Thanks for taking my question. Therese, one for you and maybe Owen as well. This is a business that's obviously been through a number of varying environments over the years with the core financial close solution. I'm just curious what in your mind are some of the most important best practices for you as you navigate an environment like this may be informed by things that have happened in past cycles? Thanks so much.

Time to value, time to value. We've got to -- people are willing to invest if they're going to see a payback on it. And so this is why industries is helping us so much because we have very focused business cases where other customers, you may have seen in the ExxonMobil recent earnings call. They said they've literally saved tens of thousands of hours installing BlackLine. Okay. I mean, and they've gotten better data and an and, right? So when you have those kind of proof points and you kind of need them for this environment because nobody wants to make a bad investment right now. So you've got the proof points that you can deliver value, then you've got to do that in a very expeditious way.

So Adam, I'm going to take this a little bit different. And one of the advantages of having 2 relatively older CEOs is we've seen a lot of downturns, if you want to go all the way back. And I think the thing that this team is doing really well is staying disciplined and focused on executing. And I think what Therese and I talked with our leadership team about and I was going to use the Bill Bell check example, but given he's been in the news a little bit too much lately. I'll just sort of we created our playbook of how we want to run this company. And then we have brought in a leadership team that I would call sort of the lunch buffer gate. They are hard-working. They're in the trenches. They know what to do. They understand it, and they're doing it really well. And we're not getting directed by things that -- take us away. So it's about discipline. And I think as I was watching the Annual Meeting of Berkshire Hathaway over the weekend, and I had the privilege in my prior life of serving that company and that Board and leadership team. And if there's one thing I learned from them, it was discipline and patience. And I think those are the things that Theresa are trying to bring here to this organization is making sure we keep that discipline and the patience of what we need to do to make sure we're not reacting to things. in the short term because we're here to build a big important franchise for the office of the CFO.

Thank you. Our next question comes from the line of Jake Roberge of William Blair. Your line is now open.

Yeah, thanks for taking the question. Great to hear about the strong SolEx performance this quarter. I know there's been some leadership changes at SAP with your key contacts over there. So curious what the feedback has been from those new leaders that are in place and whether you feel like that type of performance you saw this quarter is kind of the normal now that those relationships are getting more established?

I'll sum it up in a short text exchange between Chris and [Indiscernible] and myself, which was right after they put their results out and where ours weren't out yet. And I think we are both very pleased with the progress that we're making. And I know Therese is spending time with their leadership team. Stewart spent time with their leadership, I think we really feel good about what we're trying to do going forward. It's a very clear game plan. It's a win-win for both of us. And more importantly, it's a win for our customers when we do it right. I think Theresa just gave the example of ExxonMobil is a perfect study and all that. And so I think there's -- I don't want to say loose guys ahead, but I think better days are ahead as we move forward. And the only reason I don't want to say lose guess because you just don't know what the next couple of months are going to look like. But certainly, medium term or long term, we feel very, very bullish about what we're trying to ops together.

Thank you. Our last question comes from the line of William Jellison of D.A. Davidson & Co. Your line is now open.

Great. Thanks for squeezing me in. I wanted to ask about a statistic you gave at the beginning of the call, which was just in, which was that go-live volume was up 20% year-over-year. I'm curious how you think about the progression of that improvement as you do some more work in intercompany, it sounds like and the kind of impact you have -- you expected to have on momentum in revenue.

Yeah. Really good question. And I think one of the things that Theresa has said a couple of times and Patrick said there in this as well. It's like time to value. And I think a lot of what we were looking at is on our new leadership, Jimmy Duan and Victor Perez and our professional services and customer success. I think they took a really hard look at how quickly are we getting our customers live? What are the challenges that sort of take momentum out of what we're trying to do and figure out with our customers? We have a sort of what must be true conversation to our customers now about what the customer must do what BlackLine would must do. And if there's a partner involved, what we must all do together to drive success. And we've been doing that across financial close for quite a while. We really have made a lot of progress and acceleration in FRA, financial reporting and analytics consolidation as well as invoice to cash. Intercompany is probably our best most complex solution in so many ways. I think there's been a lot of lessons learned over the last 12 or so months of what we have to do a lot of this because of the complexity and uniqueness of many of our customers really understanding requirements, requirements, requirements upfront. If we can get that right, these things go that much quicker and better and more value for our customers more quickly. I think the other thing that we're starting to see in some conversations since the U.S. election, we all knew that there was going to be conversations around tariffs and trade and things of that nature, that has gotten more conversations going with our customers and with our partners because the way supply chains might change the way that tax policies might change, those have real financial impact for our customers. And I don't think there's -- in fact, we know there's nobody better positioned with the solution that's done with our partners and our customers and our own professional services team to drive and help our customers capture after that value. So the intercompany is sort of, I don't want to say the last frontier of what we need to do, but there's lessons learned that we're trying to apply to accelerate what we're doing for our customers in that regard. And we feel pretty good about what's coming up the pipe on that one.

Thank you. This concludes our question-and-answer session. I would now like to turn it back to Owen Ryan for closing remarks.

Thank you, operator, and thank you all of you for being on the phone and for following BlackLine. We truly appreciate you doing that. And we look forward to continuing our dialogue with you as we move forward. Have a great night, everybody. Take care.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.